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Palladium Price -$90 from Short-Squeeze Spike vs. Record Bearish Specs

Spike in palladium price follows record bearish betting...
BEARISH betting against palladium prices set another fresh record in Nymex futures and options last week new data shows, just ahead of the precious metal spiking almost 1/5th in price on a sudden 'short squeeze'.
Finding over 4/5ths of its end-use from autocatalyst demand to reduce harmful emissions from gasoline-engine vehicles, palladium today retreated to $940 per Troy ounce, down 8.7% from Friday's short-squeeze peak.
That's barely 1/3rd the record prices hit during the post-Covid supply squeeze of 2021 and then the all-out invasion of Ukraine by Russia – palladium's No.1 mining nation – in early 2022.
The total share of petrol and diesel cars sold in Europe last month fell below 50%, trade association Acea said last week. But May also saw battery electric vehicles – which don't require any palladium or other platinum-group metal catalysts – fall to 12.5% of new car sales, down from 13.8% twelve months before and confirming the slowdown in BEV adoption.
Hybrid-electrics in contrast – primarily combining electric power with a petrol engine needing a palladium or platinum autocat – grew from 25% to nearly 30%.
Chart of 'Managed Money' net speculative position in US palladium futures and options contracts vs. palladium bullion price. Source: BullionVault
Latest data from US regulators the CFTC, delayed until Monday by last week's Juneteenth holiday, show that net of bullish bets, bearish betting against palladium by speculative traders reached its 3rd new all-time record in a row last week.
In a market where end-user demand is forecast to outstrip global supply by 35.1 tonnes in 2024, the negative Managed Money position recorded last Tuesday equated to 50.0 tonnes of bullion, almost twice the size of the 'specs' average net bullish position since 2006.
That CFTC data – tracking trader positioning in the CME derivatives exchange's Nymex palladium futures and options contracts – was taken as the precious metal hit a 360-week Tuesday low at $872 per Troy ounce.
From there, palladium prices in the spot market then spiked by 18.1% to Friday afternoon's peak at $1030.
Dealers in the physical palladium market last week reported growing demand to borrow the metal, suggesting fresh bearish betting through 'OTC' contracts as well as through Nymex futures and options.
"The availability of palladium bars was especially tight in London," adds Reuters, citing industry sources.
Trading volumes in London's physical palladium market had already leapt in the week-ending 14 June according to trade data reported by members of the London Bullion Market Association, rising by 30.0% from the previous week while gold trading slid by 14.7% with silver and platinum volumes little changed.
"Given [palladium's] significant deficit" between supply and demand, says specialist analyst Wilma Swarts, head of platinum-group metals at data providers and consultancy Metals Focus, "above-ground stocks have declined to their lowest levels in our records" dating back to 1980.
"Deficits are [also] expected in 2024 and 2025. This will further tighten liquidity and is likely to lift or support prices this year."
Since early February, when the price of palladium bullion hit its lowest since August 2017 at $876 per Troy ounce, the Managed Money's net bearish betting in CME Nymex contracts has grown by one quarter to last week's fresh record high.
Led by investment company abrdn's Physical Palladium Shares product (NYSEArca: PALL), the total size of palladium-backed ETFs worldwide has meantime risen to the highest since New Year 2019 according to data from Bloomberg.
But those products as a group remain 4/5ths smaller than their 2015 peak, and the 2nd largest such palladium ETF – the closed-end Sprott palladium product (TSE: SPPP) – ended last night at a discount of 3.3% to the value of the metal held in trust to back its shares, suggesting weak investor interest.
"Slower EU car sales in H2'24 could drag on palladium demand," says German refining and precious-metals technology group Heraeus.
But "platinum deficits [between global supply and demand] could be deeper than our base case," says the mining industry's World Platinum Investment Council, "and palladium could take longer to enter surplus should slower BEV adoption rates persist."

Adrian Ash

Adrian Ash, BullionVault Gold News

Adrian Ash is director of research at BullionVault, the world-leading physical gold, silver, platinum and palladium market for private investors online. Formerly head of editorial at London's top publisher of private-investment advice, he was City correspondent for The Daily Reckoning from 2003 to 2008, and he has now been researching and writing daily analysis of precious metals and the wider financial markets for over 20 years. A frequent guest on BBC radio and television, Adrian is regularly quoted by the Financial Times, MarketWatch and many other respected news outlets, and his views from inside the bullion market have been sought by the Economist magazine, CNBC, Bloomberg, Germany's Handelsblatt and FAZ, plus Italy's Il Sole 24 Ore.

See the full archive of Adrian Ash articles on GoldNews.

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